The 65th-ranked Estonian slammed 22 winners, including 10 aces as she needed just 64 minutes to dispose of the American, who saw her eight-match winning streak at Melbourne Park end.
Estonian produces fine performance to knock out reigning champion
Kanepi set the tone for the match by saving three break points in her opening service game, holding with an ace. From 15-30 down, Kenin committed a pair of backhand errors to hand the Estonian a break and 3-1 lead.
Both players then came through long, tough service games as Kanepi took a 4-2 lead and serving for the set three games later, the world number 64 thundered down an ace on set point to take a one-set lead.
After an exchange of holds to begin the second set, Kanepi again watched as the American hit wayward backhands to get broken, giving the Estonian a 2-1 advantage.
Cruising on serve, the world number 64 went ahead by a double break as Kenin missed on yet another backhand to hand Kanepi a 5-2 lead and serving for the match, she fired three straight aces from 15-30 down, a symbol of what the match was about.